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Will investors buy the Winkelvoss Bitcoin ETF?

The Winklevoss twins are hoping to capitalize on the nascent popularity of Bitcoins by creating a first-ever ETF based on the currency.

Observers of the ETF market have been watching with a mixture of amusement and confusion as the Winklevoss twins, the entrepreneurial team made famous by their successful litigation against Mark Zuckerberg several years ago, are attempting to create the first-ever Bitcoin ETF. The investment team plowed some of their riches into the Bitcoin market when it was on the up-and-up, but it remains to be seen if their careful planning will actually take off.

Before we dive into what the Winklevoss twins are up to, let's look at some background. The Bitcoin market has thrived largely on the belief that this virtual currency is a preferable mode of economic transfer compared to the dollar, euro or other fiat currency. While the underpinning assets are fundamentally different, some believe that Bitcoins are no more or less viable than the dollar. However, a full-on market rout earlier this year seemed to confirm for many investors what they already suspected: That Bitcoins, as a market, are too underdeveloped at present for large-scale investment.

Yet the Winklevoss twins see something else. They envision an ETF that lets investors diversify their portfolio with what the they see as a digital currency on the cusp of wide-spread usage, according to a New York Times report from earlier this month.

"The trust brings Bitcoin to Main Street and mainstream investors to Bitcoin," Tyler Winklevoss said in a statement. "It eliminates the friction of buying and reduces the risks associated with storing Bitcoin while offering similar investment attributes to direct ownership."

If this ETF gets off the ground – at the time of this writing, the Securities Exchange Commission is investigating the twins' application – it could pose a unique opportunity for investors with a heftier risk appetite. On the other hand, it does call into question the need for tools that make investing in funds like this more manageable.

Instead of jumping into a dubious ETF like this, hewing to a more strongly position one in the gold market might be a wise choice. This is where SmartStops come in. SPDR Gold Trust is one of the most popular on the market these days, having climbed from $115 to $124 at the time of this writing, and our innovative tools can make analyzing risks in the gold market and the wider industry far more effective. Our Risk State analysis shows that this ETF has been in an Elevated position since February, suggesting that pressures in the gold market are something to watch out for.

Want to learn more? Click here to learn how SmartStops can protect your portfolio from sudden losses before they become a long-term issue.